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n California, a fresh legislative effort is underway to address the consequences of the controversial NEM 3.0 policy. This new bill, spearheaded by Assemblymember Laura Friedman, is designed to reshape the way the California Public Utilities Commission (CPUC) evaluates net metering rates for rooftop solar installations.
At the heart of the legislation is the requirement for the CPUC to fully consider both the costs and advantages of rooftop solar energy. Friedman suggests that the current system only looks at certain financial perks of rooftop solar. Since NEM is more than just a pricing plan, but a big policy effort that will shape the future of renewable energy in California, she thinks it's crucial for decision-makers to review all the necessary information when they're tweaking the pricing. This includes tangible improvements to local air and water quality, reduced strain on land resources, and broader cost benefits.
Friedman expressed her worries about the challenges NEM 3.0 presents for middle-class Californians trying to adopt rooftop solar, making it less affordable and accessible. She brought attention to an alarming 80% decrease in new solar installations, highlighting the need for policies that recognize and compensate for the full spectrum of benefits provided by solar energy, from environmental to health and communal advantages.
History of NEM in California
California has been at the forefront of adopting renewable energy, with a particular emphasis on solar power. This journey has been significantly shaped by the state's Net Energy Metering policies, which have changed over time to keep up with new technology and how the world of solar is growing. The most recent update, however, has stirred up some lively debates. Let's take a look at the journey net energy metering has taken in California over the years.
The Dawn of Net Energy Metering: NEM 1.0
Over the last several years, California has seen exponential solar market growth, particularly in the Sun Belt. Much of that has been driven by the Net Energy Metering program, which first rolled out in 1996 and incentivizes people to install solar panels in California through an energy buy-back program. Under NEM 1.0, homeowners with solar setups could offset their electricity consumption with their solar production, receiving credits for excess energy fed back into the grid at the same rate they would pay for utility electricity. This one-to-one credit exchange motivated homeowners to invest in solar panels by making it financially worthwhile. However, participation was capped, limiting the number of people who could benefit from the policy.
Transition to NEM 2.0
In 2017, California revamped its solar compensation rules, shifting to NEM 2.0. Despite introducing a minor charge and lowering the rate for surplus electricity returned to the grid, the essence of equal-value energy exchange remained intact. It encouraged homeowners to generate 100-110% of their energy needs, allowing them to offset nearly all their electricity bills with just a small monthly charge. This policy, along with climbing utility costs, led to a boom in residential solar projects, with California's residential solar market making up over 50% of the US's installed capacity.
The Introduction of NEM 3.0: A New Chapter
On December 15, 2022, a significant change happened in California's energy scene with the introduction of NEM 3.0, also known as the Solar Billing Plan. This big move by the California Public Utilities Commission started on April 15, 2023, and notably slashed the earnings from excess solar electricity shared with the grid by about 75%. This means that if you have solar panels in California, you'll find that the savings are not as high as before, and it'll take longer to recover the PV panel installation cost. The idea behind this change was to encourage homeowners to add battery storage to their solar setups, aiming for more self-reliance and a stronger, more stable electricity grid.
The Ripple Effects of NEM 3.0
The solar industry in California felt the ground shake with the roll-out of NEM 3.0. The California Solar & Storage Association (CALSSA) has reported an alarming loss of 17,000 solar jobs by the end of 2023, a bigger hit than what the industry faced during the COVID-19 pandemic. This job loss could account for 22% of all solar-related jobs in California.
Sales of solar systems have also taken a major hit, with a stunning 77% to 85% yearly drop, and the number of applications to connect to the grid has fallen by 66% to 83%. On top of that, 70% of businesses that install solar panels and batteries at homes are worried about what the future holds. Alarmingly, nearly 43% of these companies, which translates to around 300 businesses, are doubtful they can survive under these conditions. Indeed, several have already had to close their doors.
This big policy change isn't just affecting businesses; homeowners seeking to reduce their energy costs with solar energy are also feeling the pinch. Even though there are still some benefits for those who decide to install battery storage alongside their solar panels, these advantages have been slightly reduced by recent updates.
Lastly, reaching California's clean energy targets could become tougher with NEM 3.0 in place. According to the California Energy Commission (CEC), the state has to install 6 GW of solar and storage capacity every year to achieve a 100% clean electricity grid by 2045. Despite these high ambitions, the state's actual progress over the last five years falls short, achieving only half of the annual goal. Currently, the state is adding about 2.3 GW of large solar and battery projects annually, which is way off the mark needed to fulfill its clean energy objective.
Mobilizing for Change: The Save Solar Coalition
Laura Friedman's new bill isn't the only action being taken to support solar energy in California. Over 60 groups have come together to form the Save Solar coalition, urging Governor Newsom, legislative leaders, and the California Public Utilities Commission (CPUC) to take immediate steps to boost the growth of rooftop solar panels in the state. By fostering an environment conducive to solar adoption, California reaffirms its status as a trailblazer in advancing the transition towards clean, renewable California solar energy.
In their joint letter, they're asking for a variety of actions to counter the negative impacts of existing net metering policies and to pave the way for a sustainable solar future. A major point in their campaign is urging the CPUC to promptly give out $280 million in residential storage incentives allocated in the 2023-2024 budget. This money, according to the group, is supposed to help low-income families in California get access to clean energy by installing batteries at home.
Additionally, the coalition is fighting to postpone the start of the Virtual Net Energy Metering (NEM) and Aggregate NEM programs. This move is intended to ensure that places like schools, farms, and apartment complexes can keep producing and using their own solar power. Another critical request is for the CPUC to re-evaluate and fully acknowledge the myriad benefits of rooftop solar, including those not currently reflected in the CPUC's Avoided Cost Calculator.
Still Have Questions? Watch This Video to Know More About NEM 3.0:
The NEM 3.0 Conversation Carries On
The debate around NEM 3.0 has ignited a necessary discussion about what's next for solar power in California, stressing the importance of policies that fully appreciate the benefits of rooftop solar. With Assemblymember Friedman spearheading new legislation and the Save Solar coalition rallying support, there's a growing movement aimed at overcoming the challenges. Whether this collective effort will result in policy changes and boost the state's solar industry is something we're yet to find out.
California's latest solar payout cuts have hit renters and schools hard, leading to widespread criticism and calls for policy revisions.
Sources:
https://leginfo.legislature.ca.gov/
https://calssa.org/press-releases/2023/12/22/
https://static1.squarespace.com/static/
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Key takeaways
Legislation in Motion:
California reacts to the repercussions of NEM 3.0 with a new bill led by Assemblymember Laura Friedman, aiming to reshape how net metering rates for rooftop solar are evaluated.
Holistic Evaluation Demanded:
The bill calls for a comprehensive assessment of both costs and benefits associated with rooftop solar, challenging the current focus on financial perks alone, emphasizing tangible improvements in air quality, water resources, and broader cost benefits.
Challenges of NEM 3.0:
NEM 3.0, introduced on December 15, 2022, and active since April 15, 2023, triggers an alarming 80% decrease in new solar installations, resulting in a major loss of 17,000 solar jobs and a 77-85% drop in solar system sales.
Impact on Clean Energy Goals:
California's ambition to achieve a 100% clean electricity grid by 2045 faces challenges with NEM 3.0, as the state falls short of the necessary 6 GW annual solar and storage capacity installation, achieving only half of the target.
Save Solar Coalition's Advocacy:
Over 60 groups unite in the Save Solar coalition, urging immediate actions to counter the negative effects of net metering policies. Their campaign includes advocating for residential storage incentives and re-evaluating the benefits of rooftop solar.
Future Uncertainties:
The ongoing debate around NEM 3.0 sparks a crucial discussion about the future of solar power in California. Assemblymember Friedman's legislative efforts, coupled with the Save Solar coalition's initiatives, drive a collective movement toward overcoming challenges and reshaping solar policies in the state.
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